Introduction to the Klinger Volume Oscillator Indicator
The Klinger Volume Oscillator is a trend following oscillator developed by Stephen Klinger. It was intended to be a trend following long-term oscillator which can be responsive enough to identify short-term signals.
What is the Klinger Volume Oscillator Indicator?
The Klinger Volume Oscillator (KVO) or Klinger Oscillator (KO) is a trend following technical indicator which presents trend indications as an oscillator. It detects the general flow of price based on the long-term trend while at the same time remaining sensitive to short-term trend fluctuations. It also emphasizes volume as a major element when identifying trend direction.
How the Klinger Volume Oscillator Indicator Works?
The Klinger Volume Oscillator first computes for the Volume Force (VF). The Volume Force formula has a complex algorithmic type of computation which includes volume and trend within its formula. It also computes for the trend based on an algorithmic type of formula which also compares the high, low, and close of price.
The Klinger Volume Oscillator then computes for the difference between the 34-period and 55-period Exponential Moving Averages (EMA) of the Volume Force. The result is then plotted as bars which oscillate around a midpoint zero.
The Klinger Volume Oscillator also plots a signal line which is typically 13-period Exponential Moving Average line of the Klinger Volume Oscillator bars.
This version of the KVO indicator allows the EMA inputs to be modified instead of the standard, 34, 55, and 13 EMAs.
How to use the Klinger Volume Oscillator Indicator for MT4
The KVO indicator can be used as a trend reversal signal based on the crossing over of the KVO bars and the signal line or the crossing over of the bars over zero. This is the basic usage of the KVO indicator. However, this method may produce some false signals on non-trending markets.
The KVO bars can also be used as a trend direction filter since the KVO bars tend to stay above zero whenever the market is in an uptrend, and below zero when the market is in a downtrend.
Another way to use the KVO indicator is to trade the reversal signals coming from unusually extreme KVO levels due to deep retracements in confluence with a long-term trending market. Such long-term trends can be identified visually based on price action or with the use of other trend following indicators such as long-term moving average lines.
Since the KVO indicator is an oscillator type of indicator, it can also be used as a basis for divergences.
Buy Trade Setup
When to Enter?
Identify an uptrend market and wait for a deep retracement to cause the KVO bars to spike below zero. Open a buy order as soon as the KVO bars cross above zero. Set the stop loss on the support below the entry candle.
When to Exit?
Close the trade as soon as the KVO bars cross below zero.
Sell Trade Setup
When to Enter?
Identify a downtrend market and wait for a deep retracement to cause the KVO bars to spike above zero. Open a sell order as soon as the KVO bars cross below zero. Set the stop loss on the resistance above the entry candle.
When to Exit?
Close the trade as soon as the KVO bars cross above zero.
Conclusion
The KVO indicator can be a useful trend following oscillator. However, its trade signals will not always be very reliable when used as a standalone trend following signal. It is best to use this indicator in confluence with other trend following indicators and technical analysis.
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